21 May 2008 13:04 [Source: ICIS news]
LONDON (ICIS news)--Dow Europe has announced a €150/tonne ($234/tonne) price hike on all its polyethylene (PE) products for June in a bid to boost margins in the face of soaring upstream costs, it said on Wednesday.
PE buyers said they were surprised at the size of the hike.
"The cost of oil is already twice as high as it was this time last year and industry reports tell us that it will continue to rise in the near future," it said in a statement. "This is seriously affecting our cost position and eroding our margins."
"We need to reflect the reality of the current feedstock cost situation in the price of our product," said Isidro Quiroga, commercial vice-president for basic and performance plastics for Europe and India, Middle East, Africa.
"It is imperative that we restore margins to prevent business from becoming unaffordable and to avoid having to make asset decisions at a time when we are experiencing strong demand."
Dow had already taken the decision to cut back high density PE (HDPE) output at Tessenderlo, Belgium, by 20%, due to the lack of profitability.
The amount of the increase came as a surprise to the PE market.
"The market is not robust enough to take such an increase," said one large PE buyer on hearing the news. "There is oversupply. I don’t expect to be paying any increase in June."
Low density PE (LDPE) prices were trading just below €1,300/tonne FD (free delivered) NWE (northwest Europe) in May, down from their February high of €1,350/tonne FD NWE. These gross price levels are subsequently discounted.
Net spot levels were closer to €1,200/tonne FD NWE in May.
Other HDPE producers in Europe include SABIC, INEOS Polyolefins, Borealis, Total Petrochemicals, Polimeri Europa and LyondellBasell.
($1 = €0.64)
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